Applied Extrusion launches solicitation; GE to provide DIP financing

By Jeff Pines

Washington, Nov. 1 - Applied Extrusion Technologies Inc. launched a solicitation of the holders of its 10¾% notes senior notes due 2011 for a pre-packaged Chapter 11 Monday, the company said.

There are $275 million of the notes outstanding.

The company attributed its ills to tough industry conditions, the high cost of petroleum and raw materials. Applied Extrusion manufactures and supplies oriented polypropylene used in consumer product labeling, flexible packaging and overwrap applications.

The New Castle, Del.-based company said it will go ahead with the pre-packaged Chapter 11 if it has the support of at least 50% of the holders with more than $500,000 in principal of notes and two thirds of principal.

Applied Extrusion said it already has the support of creditors holding or controlling more than 70% of the principal of the notes.

Noteholders would get an estimated recovery of 49%, according to paperwork filed with the Securities and Exchange Commission Monday.

The restructuring agreement calls for the noteholders with more than $500,000 of notes to get all of the reorganized company's equity as well as a portion of $50 million of 12% seven-year senior notes. Applied Extrusion estimates there are at least $212 million of large note claims.

The new notes would be redeemable starting in 2005 at 106%, at 103% in 2006, at 101% in 2007, and at 100% starting in 2008.

Those holding less than $500,000 of notes would get cash. The company estimates there are not more than $63 million of small note claims.

One possible problem is that Ingalls & Snyder LLC, a broker or investment adviser to more than 300 owners of the notes, opposes the reorganization because it would take the company private, Applied Extrusion said.

Attorneys for Ingalls & Snyder also believe the reorganization plan could not be confirmed because it divides noteholders into large and small categories, the company said.

Common stock would be cancelled.

GE Capital Corp. has agreed to provide the company with a $125 million of debtor-in-possession financing and a $125 million senior secured exit facility. Applied Extrusion estimates it will have access to up to $30 million on an interim basis.

The DIP facility would include a $55 million revolver, a $50 million term loan, and a last out term loan of up to $20 million. GECC Capital Markets Group Inc. would be the lead arranger for the DIP and the exit facility.

The loans would mature on the earlier of one year or the effective date of a reorganization plan.

The interest rate on the revolver would be Libor plus 325 basis points; the interest rate on the term loan would be Libor plus 425 basis points; and the interest rate on the last out loan would be Libor plus 575 basis points. The facility would also have an unused facility fee margin of 50 basis points.

The exit facility would mirror the DIP with a $55 million revolver, a $50 million term loan, and a $20 million last out term loan. The interest rates would be the same as those of the DIP.

The deadline for voting is Nov. 24.

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